TMI Blog2010 (12) TMI 93X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 143(3) of the Act. The conduct of the AO attracts the rule of consistency. - Decided in favor of assessee. - ITA. No. 2733/Mum/2009 - - - Dated:- 15-12-2010 - SHRI T.R. SOOD, AND SHRI VIJAY PAL RAO, JJ. For appellant : Shri Paresh Shaparia For respondent : Ms. Ashima Gupta (DR) ORDER PER T.R. SOOD, A.M. 1. In this appeal various grounds have been raised. But only dispute before us raised by the assessee is that learned CIT(A) erred in confirming the short term capital gain of Rs.1,07,70,524/-. 2. The assessee is engaged in the business of garments manufacturing and exporting garments and was also making investments in shares. During the assessment proceedings it was noted by the Assessing Officer that the assessee had shown short term capital gain of Rs.1,07,70,524/-. On enquiry, it was stated before him that assessee was engaged in the business of manufacturing and exporting of garments through a firm viz., M/s. Zen Clothing Co. where assessee was a working partner. Assessee was also a Director in a company known as Chanakya International (P) Ltd. which was also engaged in the business of export of garments. It was stated that assessee is only an inves ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 18686307.75 20044671.39 1358363.64 After 1.10.2004 Sl No Name of company No. of shares. Purchase date Purchase value Saledate Salevalue Short term gain/loss on No. of days 1. TELCO (Tata Motors) 35000 4/11/04 14949874.20 11/11/04 14726497.7 -223376.50 7 2. TELCO (Tata Motors) 5000 28/10/04 1993264.24 11/11/04 2103785.39 110521.15 14 3. Jinal Iron Steel Co. 3500 18/11/04 1036966.86 03/-not clear 981776.76 -55190.10 15 4. Telco (Tata Motors) 15000 26/10/04 6250509.02 11/11/04 6311356.16 60847.14 16 5. TCS 1500 14/10/04 1647214.85 04/11/04 1727016.55 79801.80 21 6. Jinal Iron Steel Co. 15000 11/11/04 4425387.29 3/12/04 4207614.71 -218272.58 22 7. TCS Ltd. 7500 13/1/05 10010698.05 04/2/05 9 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , assessee was fully busy in his garments business. He further submitted that assessee was investing in shares from a long time and in earlier years such transactions were accepted by the department. Assessee had not made any borrowings. Assessee had never entered into the derivative transactions. Two transactions quoted by the Assessing Officer happened because of the mistake of broker and assessee had suffered loss in both the transactions which assessee had not contested in any case. He argued that in this year, Government had already introduced the security transaction tax and the idea was that no share transaction should go without tax. He therefore, referred to pages 18 of the paper book which is copy of the list of the shares held as on 31st March, 2005 and pointed out that assessee was holding shares in only 15 companies cost of which was Rs.11,56,65,048/- whereas the market value of the same was Rs.17,69,58,313/-. This clearly shows that despite of gain of almost Rs. 6 crores in the shares which were carried on for next year by the assessee, assessee preferred to hold these shares than to sell the shares. This clearly shows that assessee was an investor. Then he referred t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onic trading system of stock exchange into 100 smaller transactions, it does not mean that this person has entered into 100 transactions. Assessee has carried out only 31 purchase transactions and 25 sale transactions which cannot be said to be a great volume of transactions. Further, assessee was holding shares worth Rs. 11.56 crores at the end of the year and market value of the same was about Rs.17.69 crores. If assessee was a trader, he would have definitely realised this huge profit of almost Rs. 6 crores immediately and not carried out the stock to the next year. As far as the two transactions narrated by the Assessing Officer in which no delivery was taken and transaction was settled in the same day we agree with the submission of the learned Counsel for the assessee that perhaps these particulars were wrongly carried out on behalf of the assessee by the broker that s why assessee got them settled on the same day and has not contested these two transactions. Assessee has also not borrowed any money and he already occupied full time business for garments through the firm M/s. Zen Clotyhing. He further find that in identical circumstances in the case of sister, the Tribunal ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the period of holding. If the average investment made by the assessee in one scrip is taken, it comes to around Rs.45.00 lakhs as pointed out by the assessee, which appears to be too high for an individual to hold as stock-in-trade. The portfolio of the shares shows that many of the scrips are of blue chip companies, their shares in which are normally considered to be safe and sound investments. The list is attached to the Balance Sheet as on 31.03.2005 and it includes the shares of Madras Cements Ltd., Colgate Ltd., Lumax Industries, Bharat Electronics, Reliance Industries, Finolex, Mahindra Mahindra, Appolo Tyre, TCS Ltd., NTPC, TISCO, Polaris, etc. The details of the short term capital gains also attached to the balance Sheet shows sale of shares of several blue chip companies besides the aforesaid companies. The assessee has not indulged in any dealings in futures and options and the instances of share transactions involving no delivery are only two and the loss therein was only Rs.474/-. The AO appears to have been influenced more by the frequency of the transactions and he has cited the brokers contract notes which show a number of orders placed for purchase of the sha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Departmental authorities that the assessee held the shares as her stock-in-trade. In the assessment year 2004-05 the assessee sold 30 scrips and earned capital gains of Rs.1.05 crores, which was accepted by the AO as short term capital gains under section 143(3) of the Act. Similarly in the assessment year 2007-08 also the capital gains of Rs.0.08 crores on sale of 24 scrips was treated as short term capital gains by the AO in the assessment completed under section 143(3) of the Act. The conduct of the AO attracts the rule of consistency and this principle considered along with the other facts found in the preceding paragraph, persuade us to hold that the surplus on the sale of shares was rightly declared by the assessee as short term capital gains. In addition to the same we find that the attempt of the CIT to assess the long term capital gains for the same year as business profits under section 263 of the Act, on the footing that the assessee is a regular trader in shares and securities was ultimately dropped by order dated 19.03.2010. In the notice issued on 26.11.2009, the CIT expressed the view that if the assessee is to be treated as a regular trader in shares and securiti ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
